Currently, a business (or organization) may incur different types of expenses as part of a total expense in order to provide goods and/or services to customers. In addition, the Internet economy has placed demands on the types of expenses incurred by the business. In particular, a traditional supply chain has been extended beyond the business' boundaries, additional revenue streams are more difficult to receive than previously, and profit margins have dwindled due to increased competition. Businesses are, therefore, forced to re-examine the extended supply chains and identify areas of improvement for lowering the different types of expenses.
One type of expense results from a procurement process which involves buying goods from external suppliers in response to customer demand. The procurement process may be a major component of the total expense incurred by the business, thus controlling the costs associated with the procurement process may aid in improving the profit margins.
Traditionally, software vendors and businesses have worked together to focus on optimizing internal processes within the business in order to decrease the total expense. One way that software vendors and businesses have focused on optimizing internal processes is through use of an Enterprise Resource Planning (ERP) component or software which manages their business processes.
When business revenues decrease, focus often shifts to optimizing the business' interactions with suppliers, partners, and customers of the business. In response, software vendors may enhance their application suites by including other components such as a Customer Relationship Management (CRM) component and a Supplier Relationship Management (SRM) component.
Together, the ERP, CRM, and SRM components comprise what may be called an “Extended Enterprise.” The Extended Enterprise focuses on the business or its processes and also into processes of suppliers and customers. An Extended Enterprise integrates customers and suppliers to better serve the extended supply chain.
In general, the ERP, CRM, and SRM components focus on different areas of the supply chain with an objective of improving business processes. ERP software is designed to be inward-facing, that is, primarily deal with internal functioning of the business. Conversely, the CRM component is generally outward-facing. Specifically, the CRM component focuses on the customer's processes and provides tools to analyze customer data. This allows the business to better serve customer needs. It also allows the business to collect valuable market intelligence that can assist in operational as well as strategic decision-making. In addition, the SRM component is generally outward-facing by dealing with the suppliers.
Embodiments of methods and systems consistent with the present invention improve sourcing practices and provide better support for operational and strategic planning by providing a framework that enables a business to analyze the historical procurement data of particular suppliers and use the generated information in its current planning decisions through a supplier performance measurement (SPM).